Kalkine Media explores 5 TSX tech stocks to watch in November

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 Kalkine Media explores 5 TSX tech stocks to watch in November
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Highlights

  • In Q3 2022, Shopify’s revenue was US$ 1,366.2 million.
  • Constellation Software’s net income in Q3 2022 was US$ 143 million.
  • In Q1 FY 2023, the adjusted EBITDA was US$ 304 million.

It is hard to predict the market movement and harder to ignore inflationary market trends. Presently, there are high interest rates in the market that may slow down the pace of investors. The technology sector surged amid this trend and on  November 11, 2022, the index witnessed a one-day surge of 7.956 per cent.

As an investor, you may choose to enter the market with a long-term approach, as time plays a crucial role in building your portfolio. The inflation periods may be challenging for investors, but with a futuristic approach, they may turn into opportunities. Look at the bigger picture and accommodate your stocks accordingly. Risks are unavoidable when you are there in the market. Hence, forming a risk-mitigation strategy is vital to stabilize your investment.

Your stock choices must sync with your wealth goals to keep the risk at bay. It will also help you to stay away from wrong choices.

Several companies are operating under Canada’s tech sector. With the dynamic nature of the sector, it is essential to stay updated with the changing trends and align them with your investment decisions. While taking a step forward, analyze your risk tolerance and time horizon. This makes stock selection easier and more effective. Let us look at the financial performances of the five tech stocks mentioned below:

  1. Shopify Inc. (TSX: SHOP)

Shopify offers Inc. operates as an e-commerce platform with a total market capitalization of US4 48555.15 million. Primarily, the company caters to small and midsize businesses with two segments- merchant solutions and subscription solutions. The former segment facilitates e-commerce and includes the company’s shipping, capital, and payments. The latter segment facilitates the company’s merchants conducting e-commerce on different platforms.

In Q3 2022, Shopify’s revenue rose to US$ 1,366.2 million from US$ 1,123.74 million for the same quarter of the previous year. The gross profit, too, witnessed an increase and was noted at US$ 662.33 million from US$ 608.9 million for the same comparative period. The company's net loss was posted at US$ 158.4 million versus US$ 1,148.43 million.

On July 8, 2022, Shopify Inc. acquired Deliverr, Inc.

  1. Constellation Software Inc. (TSX: CSU)

Constellation is engaged in acquiring, building, and managing vertical specific businesses.

The company caters to private and public sector markets and is based in Canada. Its portfolio includes auto clubs, credit unions, communications, tour operators, hospitality etc.

As of September 30, 2022, Constellation Software reported an increase in its net income at US$ 143 million from US$ 121 million in the year-ago quarter. The revenue soared to US$ 1,725 million from US$ 1,299 million for the same comparative period. The net cash flow from operating activities grew to US$ 321 million from US$ 292 million.

The total assets increased to US$ 7,325 million from US$ 5,766 million. On the other hand, liabilities increased too and were noted at US$ 5,625 million from US$ 4,245 million. With a three-year dividend growth of 6.79 per cent, the company distributes a quarterly dividend of US$ one per share. The earnings per share (EPS) is at US$ 29.68.

  1. CGI Inc. (TSX: GIB.A)

CGI Inc. is an IT-service provider that includes business process services, systems integration, consulting, and application maintenance. The company is based in Canada, along with a position in Europe and North America.  

In Q4 2022, CGI’s revenue witnessed an increase from C$ 3,007.5 million to C$ 3,247.2 million. Further, the net earnings grew to C$ 362.4 million from C$ 345.9 million. The return on equity (ROE) increased to 20.9 per cent from 19.8 per cent. The P/E (price-to-earnings) ratio of the company is 18.1.

As of November 10, 2022, the stock price of CGI Inc. is at C$ 113.84 and surged by 3.68 per cent within 12 months.

The Diluted EPS of CGI Inc. in two different quarters:

  1. Open Text Corporation (TSX: OTEX)

Open Text Corporation is a Canada-based company engaged in providing scalable and secure solutions to consumers, enterprises and SMBs at a global level. The company's software allows its clients to retrieve, aggregate and archive unstructured information that includes email, documents, presentations etc.

In Q1 of the fiscal year 2023, Open Text’s total revenue soared to US$ 852 million from US$ 832.3 million in the year-ago quarter. The adjusted EBITDA decreased to US$ 304 million from US$ 323.4 million. The operating cash flows, too, witnessed a decline and were reported at US$ 132 million from US$ 189.7 million.

In Q1, 2023, the cash and cash equivalents grew to US$ 1,704.38 million from US$ 1,693.74 million in the previous quarter of the same year. The dividend yield and quarterly dividend per share were noted at 3.438 per cent and US$ 0.243, respectively.

On August 25, 2022, OpenText announced its acquisition of Micro Focus International plc through OpenText UK Holding Limited (wholly owned subsidiary).

  1. Descartes Systems Group Inc. (TSX: DSG)

The Descartes Systems Group Inc. caters to the shipping industry by providing communication software solutions. Global Logistics Network serves as the company's core product and is transaction driven.

In Q2 FY 2023, the revenue of the company rose to US$ 123 million from US$ 116.4 million in the same quarter of last year. The gross margin also increased to 77 per cent from 76 per cent. Descartes Systems’ net income fell to US$ 22.9 million from US$ 23.1 million. The adjusted EBITDA grew to US$ 54 million from US$ 51.2 million. The company's EPS is at US$ 1.38.

On June 6, 2022, Descartes Systems Group completed the acquisition of XPS Technologies.

Bottom Line

Even though uncertainties and fluctuations may govern the market, the technology sector can prove to be a good option to explore. Despite the downturns, the sector is operating in the green space.

Check with the stocks that offer growth potential along with minimum risk. This approach may be complemented by the diversification strategy. Combining these two factors may facilitate building a long-term portfolio. Be alert and rationalize your decisions with proper market research.

Please note, the above content constitutes a very preliminary observation based on the industry and is of limited scope without any in-depth fundamental valuation or technical analysis. Any interest in stocks or sectors should be thoroughly evaluated taking into consideration the associated risks.

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